4 Ways Income Taxes Can Help Seniors Boost Their Bottom Lines
Most American seniors rely on a limited income, and this means that it's vital to ensure you get any tax benefits to which you're entitled. But what should you look for out of your taxes to help make ends meet? Here are a few tax breaks all older Americans can get.
Higher Filing Threshold. Americans generally aren't required to file taxes if their income is below a certain threshold. This threshold is equal to the standard deduction they can take. In the case of a single person under 65, this amount is $12,000 (in 2018). But when you're over 65, you get a higher threshold. This means you can potentially keep more of your income without having to report to the IRS.
Tax Credit for the Elderly and Disabled. There is a special tax credit designed to help out low income seniors. This nonrefundable credit is available for seniors with income under $17,500 (single) and $25,000 (married filing jointly over 65), and it could reduce any tax you wind up owing. There's a formula needed to determine the amount of the credit based on how much you get in Social Security benefits and pensions, so you should work with a qualified tax preparation service to claim this credit.
Dependency. Many seniors live with other family members. Whether you're taking care of others or your loved ones are helping you out, the dependency exemptions could make a difference in everyone's taxes. If you have a low enough income not to be required to file, for instance, you may qualify as a dependent relative of whomever provides the majority of the costs of the home. That would benefit the whole family with tax reductions. Conversely, you may be able to claim others as a dependent if you provide the home for them.
Higher Contributions. If you're still putting money away for retirement, you benefit from higher contribution limits that can lower your taxes and make retirement better. Anyone over 50 generally can put an additional $1,000 to $6,000 away tax-free or tax-deferred into 401(k) plans, traditional and Roth IRAs, and Health Savings Accounts.
Which of these tax breaks can you benefit from most? Talk with a professional tax preparation service, like Hough & Co CPA , to learn more about taking advantage of them as well as other aids you may qualify for as a tax paying senior. The savings will be worth your time and effort — and it will help you focus on enjoying your retirement more.